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tough decisions

Wouldn’t it be great to have an easy job with a big salary? Or a hot sports car that was very low-priced? Or a luscious dessert with no calories?

The financial equivalent: an investment with good returns and stable value. Believe us when we say this is a popular concept.

Nearly five decades ago, the Rolling Stones advised that “You can’t always get what you want.” This is surely true of each of the situations described above. You just cannot get those desirable combinations.

But “if you try sometime, you just might find, you get what you need.” On the investment front, many people need their money to grow over time to meet long term goals. Stability of value along the way would be comforting to have. The true need is growth, and the key measure is how much money you wind up with in the distant future.

The real return on truly stable assets is usually low. Some people with a lot of assets relative to their needs can live with low returns. Most of our clients need their money working harder than that—so necessarily must forego stability along the way. (Or, adjust their goals to reflect more modest circumstances.)

We take pride in telling it like it is. Although many sellers promote the false notion that you CAN get good returns and enjoy stable values, we believe you can handle the truth. Markets go up and down—and that’s OK. Whether you were born with effective investment instincts or we had to train and coach you, many of you have shown the ability to live with volatility and invest effectively anyway.

Go ahead, ask us again about that mythical investment with good returns and stable value. We will help you understand that you can’t always get what you want, but you can get what you need. Call or email us if you wish to discuss your situation.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

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Our advice generally has an upbeat slant to it, to the point that we occasionally get accused of being optimists. We believe our confidence in the future is soundly justified. We know, however, that not every situation is likely to have a happy ending. It takes money to do the things we want and need to do. Sometimes we simply don’t have enough of it.

This is the reason we are in business: to help clients make the most of their money. But there are limits to what prudent financial planning can accomplish. We think that our advice has value, but it isn’t magic. Our best efforts don’t always produce the resources we expected for major lifestyle needs. Other times, unexpected expenses such as legal or medical bills threaten our hard-earned wealth.

What to Do When Crisis Strikes

When faced with a financial crisis, the simplest step is cutting outlays. Even if you don’t have much in the way of luxuries to give up, you may find that some of the “necessary” expenses you took for granted can be reduced or eliminated. Maybe you are paying for an extra car you don’t really need, or more insurance coverage than makes sense, or a storage unit you could do without. We assume our bills are fixed, but on examination some of them may be reduced or eliminated.

Sometimes, though, your bills may be more than you can handle just by rearranging your budget, and that’s when the choices get really tough. At this point, your job is to sit down and figure out what the least bad option is.

Financial Strategies When Funds are Short

You can try to preserve your assets for as long as you can, investing conservatively and staying in stable assets to try to maintain balances. But simply seeking to maintain your value is not good enough if your assets are chipped away by your expenses. This route increases the likelihood that you will eventually run out of money. This strategy may only provide a nice, predictable trajectory until you hit zero.

Alternately, if you know you’re likely to hit zero eventually but you have a long-term investment strategy and don’t need the funds in the near future, you might take the opposite approach and invest more aggressively, pursuing growth to try to keep ahead of your expenses. Obviously, the risks are considerable; bear in mind that you should always keep a certain amount of funds to cover expenses in savings or conservative, liquid investments. There is a chance that you will lose your principal—but if you know that you are likely to run out of money in the end anyhow, the risk of running out slightly faster may be an acceptable trade-off for a chance to make it last longer.

Stay Realistic

In a situation like this, there is no right answer for everyone. The right answer for you is the one that you’re most comfortable with. It is important to remain realistic about your options, though. If you know that you need to draw $10,000 a year to live on for 20+ years of retirement, and your retirement portfolio is only $75,000, plugging your ears and insisting that everything will be sunshine and rainbows is probably only going to hurt you. Be wary of people peddling quick and easy cures for such financial woes–even if they are not outright frauds, odds are they do not have your best interests in mind.

If you feel you may be facing any tough financial decisions in your life, please call or email us to see if we can help you in your planning and thinking.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.